What if Sydney's interest-only loans reset and force a sell-off?
Australian interest-only-to-P&I conversions force seller flow into Sydney and stress the Big Four banks' mortgage books; express via short AUD and Australian financials, not US Treasuries — the modeled US 2y/10y +3-4bp and fed_hawkishness roots misattribute a domestic APRA-driven reset to US policy. Rhymes with the 2017-19 Australian IO cliff that drove the ~10-15% Sydney correction. The trigger is an amortization-schedule mechanic, so credit/mortgage-rate roots fit better than Fed hawkishness.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Australian interest-only loans convert to principal-and-interest, triggering forced sales and a Sydney price cascade. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Mortgage rates ▲ · Recession signal ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.